OECD BEPS project faces uphill battle

Businesses want greater guidance on acceptable tax planning

Two global business surveys conducted by Grant Thornton finds businesses sceptical about the success of the Organisation for Economic Co-operation and Development's (OECD) BEPS Project on intergovernmental action on tax and wanting greater clarity as to what is acceptable and unacceptable tax planning - even if this provided less opportunity to reduce tax liabilities across borders.

“We applaud the OECD in taking on this much needed project,” said Francesca Lagerberg, global leader of tax services at Grant Thornton. “But we caution the business community that finding a global solution will be very difficult and will not be speedy.”

Grant Thornton surveyed 2,500 businesses in 34 countries in May and found that only 23% think the OECD Base Erosion and Profit Shifting (BEPS) Action Plan is likely to be successful.

“We are hoping that over the last few months businesses are feeling more confident of meaningful change, given Ireland eliminating the ‘Double Irish Dutch Sandwich’ and the UK imposing a diverted profits tax called ‘Google tax’ on multinationals,” said Lagerberg.

“Many of the objectives of the BEPS Action Plan are valid. They include the elimination of loopholes that allow profits to ‘disappear’ for tax purposes. The concern is that the scope is so broad it touches almost every area of international taxation. It’s as if in an attempt to get rid of some traffic black spots, the authorities have decided to overhaul the entire road network and require every driver to modify their car.”

A separate global business survey conducted by Grant Thornton in 2013 found the vast majority (68%) would welcome more global cooperation and guidance from tax authorities on what is acceptable and unacceptable tax planning, even if this provided less opportunity to reduce tax liabilities across borders.

“Businesses need things in black and white,” said Lagerberg. “They have a responsibility to their investors and shareholders to keep costs down. Simply telling them to pay their 'fair share' is not a viable alternative to a clear set of rules or principles.”